National Oilwell Varco 2015 Annual Report Download - page 59

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Table of Contents
 
We are exposed to changes in foreign currency exchange rates and interest rates. Additional information concerning each of these matters follows:
Foreign Currency Exchange Rates
We have extensive operations in foreign countries. The net assets and liabilities of these operations are exposed to changes in foreign currency exchange
rates, although such fluctuations generally do not affect income since their functional currency is typically the local currency. These operations also have net
assets and liabilities not denominated in the functional currency, which exposes us to changes in foreign currency exchange rates that impact income. During
the years ended December 31, 2015, 2014 and 2013, the Company reported foreign currency gains (losses) of ($47) million, $20 million and ($24) million,
respectively. Gains and losses are primarily due to exchange rate fluctuations related to monetary asset balances denominated in currencies other than the
functional currency and adjustments to our hedged positions as a result of changes in foreign currency exchange rates. Strengthening of currencies against
the U.S. dollar may create losses in future periods to the extent we maintain net assets and liabilities not denominated in the functional currency of our
subsidiaries using the local currency as their functional currency.
Some of our revenues in foreign countries are denominated in U.S. dollars, and therefore, changes in foreign currency exchange rates impact our earnings to
the extent that costs associated with those U.S. dollar revenues are denominated in the local currency. Similarly some of our revenues are denominated in
foreign currencies, but have associated U.S. dollar costs, which also give rise to foreign currency exchange rate exposure. In order to mitigate that risk, we
may utilize foreign currency forward contracts to better match the currency of our revenues and associated costs. We do not use foreign currency forward
contracts for trading or speculative purposes.
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